Background: ICAP’s link to cartel
ICAP acts as an interdealer broker, distributing quotes and data on interbank exchange rates and facilitating trades between banks. The cartel participants used this data and quotes to influence the LIBOR and TIBOR rates. On this basis, the Commission found that ICAP facilitated the cartel, leading to a breach of Article 101 TFEU.
For a company to be liable for an Article 101 breach, the Commission needs to show that there was an agreement or practice which had the object or effect of affecting competition in the EU and that there was an intention to do so. ‘Intention’ can also be demonstrated through ‘passive’ participation, for example by attending meetings without objecting to or reporting anti-competitive conduct. It is therefore not just directed at those parties directly involved in the cartel or the affected market but also at facilitators, who may be indirectly involved.
The Commission indicated that certain facilitators are presumed to know of an illegal cartel’s existence if they are economically active in that market and have professional expertise. The Commission believes that such facilitators should reasonably foresee that their involvement could facilitate an illegal cartel in such instances.1 Although a data provider may well be contributing without directly benefitting or even realising its involvement, the Commission nonetheless considers that the facilitator would be indirectly benefitting through the business relationship with the cartel participants.2
A second interdealer broker, RP Martin, was also accused of facilitating the cartel. RP Martin settled with the Commission for €247,000 for a one-time infringement. However, ICAP chose to appeal and initially lost. The Commission subsequently issued ICAP with a fine for six separate infringements based on the same activity but encompassing different periods and cartel participants, using complex calculations to reflect the “gravity, duration, and nature of ICAP’s involvement” for each, with little elaboration on what this entailed.
In November 2017, ICAP successfully challenged the Commission’s decision, and the fine was annulled in full for procedural infringements arising from a lack of sufficient detail in the calculation of the fines. ICAP was, hence, relatively lucky.
The Commission contested the EU General Court’s decision that there had been a procedural infringement, leading to the Court’s judgment of 10 July 2019.
The 10 July appeal
The appeal centred around two questions: (1) how may the Commission choose its method of calculating a fine; and (2) to what extent must it show its calculations?
The method of calculation
Typically, the EU uses a set structure for the calculation of fines, which is set out in the ‘Guidelines on the method of setting fines’. Under paragraph 37 of these Guidelines, the Commission is entitled to opt for an alternative method of calculating fines if the particularities of the case require it or there is a need for a deterrence that would not be achieved through the standard method. As this case involved complex financial assets, the standard method was not used.
The court confirmed in its 10 July judgment that, where the Commission chooses to use an alternative method of calculation for fines, it is obliged to set out the reasons for doing so. It is able to satisfy this requirement by setting out the factors enabling it to determine the gravity of the infringement and its duration depending on the circumstances of the case.
In addition, the court acknowledged that the Commission has a broad discretion when deciding the method of calculation. However, if it chooses to exercise this discretion, the Commission must be transparent on which aspects of the infringement it will take into account and how these may factor in its calculations.
The maths: the Commission must show its workings
In its decision, the Commission explained that it had calculated its fines based on the “gravity, duration, and nature of ICAP’s involvement”. The court held that such a disclosure of the calculation method is an insufficient explanation to enable ICAP to understand the justification for the methodology.
The court confirmed that there must be a minimum level of information to make it possible to understand and ascertain the relevance and weighting of the factors taken into consideration when determining the basic amount of a fine. However, this explanation does not require a full disclosure of all figures and equations used to calculate the fine.
Comment
In recent years, the Commission has increased its scrutiny of competition infringements, ensuring an appropriate level of fines, particularly in more complicated cases. Consequently, this case adds some much-needed clarity as to the calculation of fines and what is considered to be an adequate amount of information when disapplying the standard method. Nonetheless, this trend does raise the question as to whether the standard method in the Guidelines needs reviewing to adapt to these changes.
It is also worth considering the amount of costs ICAP would have incurred during the legal battle in comparison to the €247,000 settlement figure paid by RP Martin. It should be noted that this figure was based upon one infringement only and was calculated in proportion to RP Martin’s revenue, which at the time of the Commission’s decision was significantly less than ICAP’s revenue.
This case serves as a warning to business-to-business service providers of the need to be cautious about suspected cartels. Even if the facilitator makes no direct gain from the cartel activity, the Commission could impose a substantial fine if it has reason to believe that the facilitator knows, or should have known, about the cartel. This decision is yet another reminder of the LIBOR manipulation scandal, however with the phase-out of the forward-looking LIBOR by 2021 to the backward-looking and less easily manipulated SONIA, interdealer brokers may have at least some protection in the future.
- Paragraph 100 of the judgment.
- See Case COMP/E-2/37.857– Organic Peroxides, Decision of 10 December 2003, paragraph 102.
Client Alert 2019-182
